HONG KONG (CNNMoney) -- Federal Reserve Chairman Ben Bernanke defended the central bank Sunday, insisting that its actions had not hindered economic growth in developing countries.
Fed policies -- especially continued quantitative easing -- have been criticized by some in the international community who say the actions are distorting currency markets and capital flows in emerging economies.
Officials in some of those markets -- including China -- have voiced concern that the Fed's easy-money policies have the potential to create asset bubbles, currency appreciation and inflation. Guido Mantega, Brazil's finance minister, has beenparticularly critical of the Fed, alleging it has contributed to a "monetary tsunami" that is hindering growth.
The Fed announced last month that it would embark on a third round of bond-buying stimulus. The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month.
But Bernanke argued Sunday that those policies are not to be blamed for trouble in emerging markets.
"It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies," the Fed chief said during a speech in Tokyo, Japan.
Bernanke said that capital flows are influenced by many factors, and changes cannot be attributed wholesale to the monetary policy choices of developed economies. Instead, policymakers in the developing world have great influence over capital flows, Bernanke said.
2. HONG KONG (CNNMoney) -- Federal Reserve
Chairman Ben Bernanke defended the central
bank Sunday, insisting that its actions had not
hindered economic growth in developing
countries.
Fed policies -- especially continued quantitative
easing -- have been criticized by some in the
international community who say the actions are
distorting currency markets and capital flows in
emerging economies.
3. Officials in some of those
markets -- including China --
have voiced concern that the
Fed's easy-money policies
have the potential to create
asset bubbles, currency
appreciation and inflation.
Guido Mantega, Brazil's
finance minister, has been
particularly critical of the
Fed, alleging it has
contributed to a "monetary
tsunami" that is hindering
growth.
4. The Fed announced last month that it would
embark on a third round of bond-buying stimulus.
The policy, known as quantitative easing and
often abbreviated as QE3, entails buying $40 billion
in mortgage-backed securities each month.
But Bernanke argued Sunday that those policies
are not to be blamed for trouble in emerging
markets.
"It is not at all clear that accommodative policies in
advanced economies impose net costs on
emerging market economies," the Fed chief said
during a speech in Tokyo, Japan.
5. Bernanke said that capital flows are influenced
by many factors, and changes cannot be
attributed wholesale to the monetary policy
choices of developed economies. Instead,
policymakers in the developing world have great
influence over capital flows, Bernanke said.
Bernanke then went further, saying that the
systematic devaluation of currencies in some
emerging markets have made those countries
more susceptible to inflation risk.
6. "The perceived advantages of
undervaluation and the problem of
unwanted capital inflows must be
understood as a package -- you can't
have one without the other," Bernanke
said.
7. Related: Market wants QE4.
Fed should say no.
Bernanke did not specifically name any countries in his
speech, but China has been consistently accused of
intervening in the foreign exchange market to depress the
value of its currency, the yuan.
Critics are not convinced the Fed's quantitative easing
program will boost growth. But Bernanke defended the policy
again Sunday, saying the purchases should help speed the
economic recovery and help job creation -- gains that he
says will translate internationally.
"Monetary easing that supports the recovery in the advanced
economies should stimulate trade and boost growth in
emerging market economies as well," Bernanke said.
